Can I Get A Bank Statement Cash Out Refinance Loan?
Bank statement loans are available with the cash out refinance feature if you are self employed and meet the minimum requirements. Bank statement cash out refinances are a great way to access some of the equity in your home.
What is a bank statement loan?
A bank statement loan allows you to qualify based upon the 12-24 month bank deposits (depending upon the lender) into your personal and/or business accounts. The lenders want to see a consistent flow of money sufficient to qualify you for the bank statement mortgage.
Why Are Bank Statement Loans Good for The Housing Market?
In the past, self employed borrowers were able to find stated income loans or no documentation loans easily. However, after the housing bubble in 2008, the programs to help self employed borrowers disappeared. They now had to qualify on their net income referenced on the tax returns. When taking all of the legal tax deductions into consideration, there was little left in net income to qualify for a mortgage. Self employed people were not active in the real estate market. They could not refinance and they could not sell and buy a new dream home. This negatively impacted the market. Now that the bank statement loans are here, the real estate market is thriving.
Bank Statement Cash Out Refinance Loan Requirements
You must be self employed for 2 years – which means you have to prove it by providing a letter from your accountant verifying that you have been in business for at least two years. You may also have to provide a business license if such a thing exists in your industry. The bank statement lender may also accept a business listing, website address, or any other form of proof. A non-self employed co-borrower (someone getting paid via pay checks with W2 earnings) may also be added to the loan in addition to their income.
Bank Statement Loan to Value Ratio – Some lenders may allow a 85% – 90% loan to value ratio. Your credit score and history may have an impact on the down payment requirement. If your credit sore is low, it may limit the amount that you can cash out.
Credit Score Requirement – There are some bank statement lenders who offer programs for self employed borrowers who have credit scores below 550. You may even be able to get your loan with a score as low as a 500 FICO score. We suggest speaking with a bank statement lender to find out how your personal situation will impact your loan options.
Bank Statement Loan Requirements – Most bank statement lenders require you to supply 12-24 months’ worth of bank statements to use as income verification. For personal bank accounts, they use 100% of the average. For business accounts, they will sometimes use 50% of the average. They will usually combine them both. The ability to use both business and personal accounts is a huge benefit.
*The bank statement lenders will use the average monthly deposits and will run it through their underwriting model to determine whether you qualify.
P&L Statements – On occasion, the bank statement lenders may require you to provide a P&L statement that has been prepared by your accountant.
Documentation of Assets – Your assets must be fully verified during the loan application process. This includes bank statements and any other assets that you would provide for a traditional loan. The more assets you can provide during the qualification process, the better chance you have to being approved for a bank statement loan. If you have low credit scores, having more assets to show on your application will help to sway the underwriting decision in your favor.
Eligible Property Types – Single family residences are acceptable for a bank statement cash out refinance loan. Second homes and investments will vary by lender.
We are the hub for bank statement loans in the United States. Let us help you to get connected to a lender that can truly help with your cash out refinance. Simply complete the form to the right if you are on your laptop or at the bottom if on a mobile device. You can also click “refinance” at the top of the screen. We are confident that we can help you to get a bank statement cash out refinance.
Bank Statement Cash Out Refinance Loan Pros and Cons
- Helps self employed borrowers to qualify for a mortgage without using tax returns to prove income
- Can be done in some instances with a maximum loan to value ratio of 90%
- Bank statement mortgage rates are just slightly higher than conventional rates
- Up to 50% DTI – Debt to income depending upon your scenario and lender
- Typically no pre-payment penalties
- Available in all 50 states
- You need to be self employed for a minimum of 2 years
- If your credit score is extremely low, it may reduce the amount you can cash out.
- Rates are slightly higher than conventional but not much more
- Not all lenders offer this program
What Can I Use the Cash Out Refinance Funds For?
Lenders like to think that you are using the funds to make home improvements. In fact, that is the smart thing to do with the cash out money. If you can add more value back into your home, then it will obviously help your resale later. Another good idea is to cash out the funds and use the money for investments. If for example, you can borrow at 5% but then you can put that money to work for you earning 10%, that is a huge win. It is much better than having that “dead equity” tied up in your home and not working for you.
A few years ago, I paid off my mortgage completely. Immediately afterwards, I got a home equity line of credit. I used those funds twice to invest in two short term real estate deals. Those investments returned about 40% which is a great alternative to having your lender sit on your money.
What Are Things You Should Not Use the Cash Our Refinance Funds For?
The worst thing you can do with the money you cash out is to use it to fund things that do not add value. I have seen people cash out money to go on vacation for example. Think about that for a moment. You refinance your entire mortgage for another 30 years and use the extra funds for a vacation? Then pay interest on it? Same goes for using the money to buy cars or anything else like that. Doing these things is an easy way to find yourself under a pile of debt.
Are Bank Statement Loans Safe?
Bank Statement loans are absolutely safe. If anything, the lender is taking the risk because you are not fully documenting your income. They are merely relying on the average deposits into your bank statements. The lenders who offer these programs are not banks that you find on your local street corner. However, they are national portfolio lenders who are reputable in the lending industry.
Where Can I Find a Bank Statement Lender?
You can either search the internet for a few days and call a few of them to see whether their programs fit your needs. However, the best way to find a bank statement lender is to let us do that for you. We are connected to the lenders who can help no matter what the scenario is. Just complete the form on the page. We will review it and then can determine which lender would fit you the best. We will then connect you to them to have a discussion at no cost.
Can I Get a Bank Statement Cash Out Refinance with Bad Credit?
Some lenders will help with your loan even if you have credit scores in the low 500’s. What you do not want to have though are late mortgage payments in your credit history. That is a big red flag to lenders especially if you are asking to close the gap between the loan amount and the home value.